The Cost of Recruitment & Selection: Hiring Process

The complex recruitment and selection process along with the costs associated are often overlooked by human resources and yet, the process is so incredibly important to the long term success of the company and their ability to reach their objectives. Companies that are more thorough in their process to recruit staff tend to have a lower turnover rate. With this said, generally, a company that takes more time to search for the right candidate, can find one that fits both the position and the company work environment. Having the proper recruitment strategy in place is vital!

In this post, we’ll share with you the main steps to ensure a successful recruitment process. We’ll also add in some crucial tips on how to select the right candidate for the job, and most importantly the hidden cost of recruitment many employers forget about, and what to consider when budgeting for the process of recruitment. 

Before you get started, make sure you download the free hiring process checklist so you don’t miss any steps!

Importance of finding the right candidate

Investing in human resources and the process of recruitment is a must! The risk of hiring someone that doesn’t fit the bill could substantially increase the overall recruitment cost of the company. A poor recruitment strategy costs a company time and money, but more importantly, the overall productivity is at risk if the wrong person is brought into the team. With such high stakes, you should without a doubt place emphasis on the process of recruiting and selecting staff with talent acquisition software.

Tip: In the age of social media, it’s helpful to look at the profiles of the top candidates on social, to get a true sense of their personality. If you are having trouble selecting between candidates, this is a great way to narrow down the pool.

However, do remember, that although social media does give us an insight into someone’s personality, we should not solely judge them by how they appear on social. 

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What is the Recruitment & Selection Process?

The process of selecting staff is apart of a series of steps that come together to form the process of recruitment. 

There are many reasons why a company would open the process of recruitment; here are some:

  • Fill a temporary absence within the team (maternity leave, medical leave, etc.);
  • Replace a staff member who has retired;
  • There is an increase in work and additional staff are required to carry out the job;
  • The company is starting a new venture;
  • To cover a newly created position.

Before beginning to search for the ideal candidate, the recruiter must first analyze the characteristics of the role, the number of vacancies they will be covering, the profile type of the candidate you want to find, and set out the actions required to follow through with the process. Finally, the company must calculate the cost of the entire process of selection and recruitment to determine whether it is viable for them to proceed or not.

Why is it necessary to budget for the process of recruitment and selection? 

How to properly handle the budgeting of the staff recruitment process is a theme that is substantially unknown and not very well controlled by the hiring manager or those responsible for human resources. The reality of the recruitment and selection process is that it incurs a massive economic cost to the company, and as is expected. To ensure there are no losses, later on, it is vital to invest in the process of staff recruitment. 

Tip: The best time to calculate the budget for staff recruitment is at the time of design.

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Recruitment Process Steps: Acquisition – Selection 

The process of selecting the right candidate for the job offer involves several steps. If you’re wondering what is the first in the end to end recruitment and selection process, continue reading on. 

Job Description Offer

A clear and detailed job description is crucial in finding the ideal candidate for the vacancy. The job description needs to be crystal clear in what the role entails. In addition, when writing the perfect job description you should indicate the abilities, knowledge, and necessary experience required. 

Advertising the Offer

One of the first hiring steps to finding candidates who fit the bill is to advertise the offer in the correct place. For some companies, specialized job boards may be the best place to connect with job seekers. Other companies may choose to communicate their offer through their website or expand their reach by advertising on posters, in newspapers, or on the radio. In addition, social media is a great resource to use when advertising your job postings. If you are on the fence about whether to hire interns, check out the benefits of hiring interns first.

CV (resume) Selection

After gathering all of the resumes, you must narrow down the selection. Following this, it’s time to screen candidates who fit the requirements of the role.

Conducting Personal Interviews

This is the best way to know the potential employees better and gain an understanding of whether they would be a good match in the company. Also,  phone interviews are beneficial for recruiters to narrow down the candidates. 

Trial Period 

You can choose to carry out tests (ie. psychological or role-specific tests), to make sure the candidates meet the requirements of the position. For instance, you may have candidates answer a serious of questions that help the recruiter get to know them better. These tests may involve an analysis of a candidate’s problem-solving abilities. 

Assessment & Selection of Top Candidates

Assessing the results of the interviews and tests of qualified candidates, allows you to narrow down your search and find the ideal candidate to fill the role. Using an applicant tracking system, such as the one Factorial offers, can keep you on track and help streamline the process of recruiting staff.

Recruitment Cost: Budgeting the Process of Recruitment & Selection

To accurately budget the selection process, it is essential to understand the difference between direct and indirect costs. 

Direct costs

These are the costs directly associated with the process of recruitment. Some of these may include;

  • Advertising the offer;
  • Materials required by the employees running candidate tests;
  • The tests themselves;
  • Interview space;
  • Food and accommodation (if applicable for hires);
  • Salary cost of the employee.

Indirect costs

The indirect costs are those which are shared expenses between other departments of the company, which are not included in the budget as a whole. Instead, the costs are divided into the budgets of the various departments they serve.

Calculating the total cost of recruitment

The total cost of recruiting staff = direct costs + indirect costs.

Let’s look at an example to display this process. If we assume that our direct costs are 150€ to advertise the job posting, 180€ for the materials of the candidates, 500€  to rent the space, 300€ for housing and food, 80€ for transportation and gas, and 300€  for the salary of the contractors (Let’s say they each worked 10 hours at 30€ per hour). 

On the other side, let’s consider that our indirect costs are 100€ for materials and administration, 40€ for the telephone bill, and 40€ for secretarial services (Let’s say they work 5 hours at 8€ per hour). The direct costs together, total 1,510€, and the indirect costs together, total; 180€. In total, the recruitment cost for the process is 1,690€. 

What to do when the budget is limited

In the case in which the total recruitment cost is higher than the allocated budget, adjustments can be made. You can consider the possibility of reducing some of the expenses involved in the process, whether direct or indirect. For example, rather than renting a space and conducting in-person interviews, you can choose video interviewing instead. Another alternative is to reduce the number of external candidates and look at hiring internally.

Now you have the keys to calculate the total cost of the recruitment and selection process. Implementing this information into your hiring plan can increase the overall profitability and success of the company. Remember, that with every new hire, it is necessary to recalculate the hiring costs. When you do this, the company has the opportunity to reevaluate its expenses and make adjustments. 

Save this guide and consult it every time you are starting in the recruitment process & discover the best free recruitment software, included in Factorial’s HR plan. 

Register in Factorial to better manage your applicants!

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2 thoughts on “The Cost of Recruitment & Selection: Hiring Process”

  1. From my experience in HR, the most important part is planning and getting to know in advance (as much as you can) how much any of those tasks can take your company. Some small and medium business owners asume that tasks like reviewing CVs could take them only 30 minutes… sometimes, even to the most experienced recruiters it can take a morning! Good to have the cost in money and time to avoid delays :) Thanks for sharing!

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